Businesses Split On Merits Of Overhauling Patent Process

The U.S. Patent and Trademark Office awarded a patent Tuesday to three California inventors for their visual prosthesis, a camera that can send messages to retinal tissue behind the eye. It was one of more than 5,100 patents issued Tuesday, and the 8 millionth in American history.

But even as the office passed that milestone, by its own estimate 700,000 patent applications lay awaiting review.

The U.S. patent system has changed little since 1952, and supporters of legislation to overhaul it say that the measure could create high-paying jobs and protect U.S. businesses’ advantage in high-tech and other industries. Both houses of Congress back versions of the America Invents Act, which would bring the U.S. patent system closer in line with other countries, and President Barack Obama has held up patent restructuring as a bipartisan issue, an increasingly rare creature in Washington.

But with the Senate expected to hold a final vote on the bill early next month, many inventors and small businesses worry that it would give big companies an unfair leg up.

Under the current system, if multiple people apply for the same patent, it’s awarded to whomever can prove he invented the product or idea first. The bill would change the system to what’s called “first to file” — common practice in much of the world — in which patents would go to the applicant who filed earlier, placing businesses with the resources to file patent forms quickly at an advantage.

Small businesses are “worried it’s going to be the ‘America Stops Inventing’ Act,” said Todd McCracken, the president of the National Small Business Association, which opposes the bill.

Patents are tremendously valuable to big business, signaled by Google’s $12.5 billion acquisition this week of Motorola Mobility, the holder of 17,000 patents and another 7,500 still under government review. As Obama tours the country this week touting the importance of creating jobs and boosting small businesses, some small- and medium-sized companies say the patent bill is at odds with that message.

Applying for patents can be a costly process for small companies, said Andrew Meyer, the president and owner of Beginnings Technology, based in Harpers Ferry, W.Va. In May, the company won a patent for a diesel fuel injector that Meyer said could be used to develop cost-effective, cleaner engines.

The four-person company spent more than six months and $50,000 drafting the application, and after filing in 2009 waited two years to learn the result.

“We can’t patent every idea,” Meyer said.

Under a “first to file” system, a company such as Beginnings Technology could get beaten to the patent office for its own invention, said Louis Hoffman, a lawyer who helped the company apply and a spokesman for the National Association of Patent Practitioners.

The bill “is very tilted toward getting applications on file more quickly,” Hoffman said, adding that it would prioritize speed over quality. On a recent application, he helped an Internet entrepreneur through nine drafting cycles; under a first-to-file system, they would’ve turned in a far weaker application, he said.

Most countries already use “first to file” systems, and supporters of the bill say the switch would promote international cooperation. In a May letter to Rep. Lamar Smith, R-Texas, the chairman of the House Judiciary Committee, then-Commerce Secretary Gary Locke described the Obama administration’s “strong support” for the change.

“The first-inventor-to-file provision is consistent with the practices of our economic competitors, and would benefit U.S. businesses by providing a more transparent and cost-effective process that puts them on a level playing field with the rest of the world,” Locke wrote.

The bill would create a post-grant review process through which companies could challenge a patent’s legitimacy after it’s been issued. Over time the competition would lead to better patents, Locke wrote.

Opponents say the reviews would create unnecessary work for the already-overburdened patent office.

With the threat of challenges from competitors with deep pockets, inventors are concerned that they’d struggle to attract venture capital investments, said Stephen Gnass, the executive director of the National Congress of Inventor Organizations. Gnass said the bill reflected years of lobbying by large businesses.

Stephen Merrill, the executive director for the National Academies’ Board on Science, Technology and Economic Policy, a nonprofit advisory group, acknowledged big industry’s lobbying role. But he said that it was commensurate with the companies’ size.

“I think you have to recognize that they’re the overwhelmingly largest users of the patent system,” he said.

McCracken countered that small businesses produce more patents relative to the size of their revenues than any other sector.

The bill’s supporters and opponents also are split over its effect on jobs. Obama repeatedly has linked patent restructuring with job growth, most recently in his weekly address last Saturday, in which he said, “Let’s cut red tape in the patent process so entrepreneurs can get good ideas to market more quickly,” he said.

But the bill’s opponents say it would stifle job growth.

“The job growth engine of this country is small business,” Hoffman said. “Small business doesn’t want this and thinks that it would be negative to small business. How is that a job growth bill?”

There’s one change that both sides seem to support. Under the current system, Congress can divert some of the fees the patent office collects to the U.S. Treasury, and it’s handed over nearly $800 million over the past decade, according to Peter Pappas, a spokesman for the patent office.

Under the bill, the office probably would keep all the fees it collects, which it could direct toward processing the backlog in applications, Pappas said.

“Many of these patents are businesses and jobs waiting to be created,” Pappas said.